What is a jingle mail ?
When a borrower walks away from his or her mortgage payment and return the keys to the bank before it announces foreclosure of the property, it is known as jingle mail. This refers to the sound an envelop full of keys creates when the bank receives it. Instead of waiting for the foreclosure process, the borrowers who could not make their mortgage surrender their property keys early.
Banks use terms like “reduced motivation to maintain possession” and “voluntary foreclosure” to illustrate the jingle mail phenomenon. However, this phenomenon started to be a serious challenge for lenders since the start of 2008. Most lenders are in the money handling business, not real estate management, so the abrupt appearance of large property inventory management was difficult for many banks.
There are some advantages for borrowers if they walk out from mortgage, although there are some serious repercussions to consider. Returning the keys to the bank in advance prevents the borrowers to have a foreclosure proceeding reflecting on their credit. However, their loan will be in default making it harder for them to borrow money in the future. The main advantage to jingle mail in the eye of some borrowers is that it enable them to walk out of the mortgage as soon as they realize that they cannot pay it and to avoid making more payment for losing proposition.
A benefit for the borrowers is the cash for keys, in which the bank pays the borrower to vacate their home. Cash for keys or jingle mail is the preference of most banks due to the good condition of the homes returned making it easier for them to sell. Reasons for borrowers to go for jingle mail ranges from falling house price to growing interest rates. Subprime mortgage crisis usually caught up many borrowers causing mortgage they could not pay as well as their increasing principal balance that makes it more difficult to handle. When these incidents go with a job loss, jingle mail would be the best option.
